UK Gas prices have continued to weaken over the past week, with a number of fundamentals pressuring the curve.

The UK experienced a period of cold and below seasonal normal weather, which significantly lifted gas demand, up to around 300mcm daily, with low wind generation and high gas burn for power. Despite a couple of days with a strong prompt gas price, the curve weakened generally and prices eased.

The UK system was well supplied during the week, with excessively strong LNG flows into the UK system, with a good supply of LNG cargoes forecast into Britain through November. This coupled with full capacity flows from Langeled following the maintenance the prior week. Norwegian flows were at 74mcm through the week ensuring the UK system was long for the majority of time.

Following the brief cold spell and first test of the UK system for the winter, gas prices have eased further. Oil prices slumped below $72bbl last Thursday as a number of reports were showing global supplies could be bolstered raising doubts over the OPEC led attempts to inflate prices. OPEC production had risen by 400,000 barrels a day throughout October, Saudi Arabia have announced they will make up the deficit of Iranian supplies following the US sanctions on the country (despite waivers being announced to 8 countries) and US stock piles rising for the 6th consecutive week.

Carbon and Coal prices both lost value throughout the course of the week, with EUA’s falling below €16 on the SPOT market.

Upcoming temperatures in the UK are above seasonal norm for the majority of November and 45-day weather models are all aligned in pointing towards a mild weather pattern, helping to reduce fears over higher demand before the New Year.

Gas prices remain bearish at present, with the UK market passing the first test of winter.

Outlook

What specifically affected prices in the past week?

Bullish factors (upward pressure)

European Gas Maintenance

Higher Gas Demand

Bearish factors (downward pressure)

Warmer Weather

Weaker Oil Prices

Cheaper Coal Prices

High Renewable Generation

Small Business Energy Market Update Tuesday 6 Nov 18 brought to you by British Utilities